Development Magazine Spring 2013

Development - Ownership

Amazon Stays True to the Urban Grid

Designed by Callison Architecture, Phase IV of the Amazon campus is a 12-story, 544,000-square-foot office building with 26,000 square feet of retail space over subterranean parking. The project includes renovation of the historic Terry Avenue Building, which has been converted into retail space for three Tom Douglas restaurants. Photos courtesy of Vulcan Real Estate.

When Vulcan Real Estate began developing land in the South Lake Union neighborhood of downtown Seattle, they envisioned a diverse and dense urban neighborhood with multifamily housing, businesses, retail, restaurants and public open space. The goal of the company was to create an economic engine for the city and surrounding region through the development of a sustainable, mixed-use neighborhood that was both transit- and pedestrian-friendly.

At the beginning of Mayor Greg Nickels’ term in 2002, South Lake Union was marked by an abundance of surface parking lots and vacant warehouses. At that time, Vulcan had assembled approximately 40 acres of land and four projects were under construction — two biotech buildings, an office structure and 161 market-rate apartments. In 2004, as Vulcan delivered its first projects — 307 Westlake (which houses Seattle BioMed); 401 Terry (home to the Institute for Systems Biology); 428 Westlake (headquarters for Tommy Bahama); and the Alcyone Apartments — the mayor unveiled an Action Agenda for South Lake Union outlining six key goals for the neighborhood:

  • Attract biotech jobs;
  • Create a new waterfront park;
  • Improve neighborhood amenities;
  • Build a streetcar line;
  • Fix the “Mercer Mess” — a heavily congested major thoroughfare in South Lake Union; and
  • Construct infrastructure to promote new jobs.
the mural at Phase V at the Amazon campus

Vulcan commissioned local illustrator Invisible Creature to create a 100 by 30 foot mural along the alley of 207 Boren Avenue North, a whimsical take on building a city.

Although the Action Agenda focused on creating jobs in the biotech industry, by 2005 the economic base of South Lake Union had become more diverse, featuring not only life science organizations, but also creative class companies that were leaders in technology, communications, architecture, design, healthcare, retailing and more. By 2006 Vulcan opened 2200 Westlake, a condominium tower that also houses various retailers including Whole Foods. Also opened was Alley 24, a mixed-use development that incorporated an historic structure with new construction, becoming home to various businesses, retailers and apartments.

In 2007, the South Lake Union Streetcar came online. This was a major tipping point for South Lake Union as this new transportation mode provided public transit access, causing more businesses to come to the area. They included a full-service grocery store, new homes and offices for several creative class firms, including NBBJ, WPP and Skanska. Soon after, Vulcan signed leases with Group Health Cooperative and Microsoft for additional office space, and began developing the Westlake/Terry building to accommodate both organizations. The area saw the addition of thousands of residents, as well as parks, art-filled open space and retail amenities, including dozens of new restaurants.

lobby of Phase V of the Amazon campus

Amazon offers a dog-friendly work environment for their employees and their canine companions.

As this neighborhood evolved, elsewhere in the city, Amazon.com (Amazon), one of Seattle’s most recognized companies, had been expanding in multiple office buildings, throughout various Seattle neighborhoods. It soon became apparent that the disparate locations of employees and work groups was inefficient. Amazon looked for a solution that would allow it to consolidate and expand in a single location. Rather than follow the path taken by many other tech companies, Amazon elected to stay in the city instead of relocating to the suburbs.

Drawing on the collaborative cultures at both companies, Vulcan Real Estate and Amazon worked closely to bring the campus to life. The two companies carefully considered bringing in amenities that would not only serve the workforce, but the existing population as well. They worked hard to include public spaces, public artwork and retail that would benefit the community at large and fit within the context of the neighborhood. For example, instead of opting to bring in large retail chains, Vulcan and Amazon were thoughtful and methodical, working hard to find businesses that were a “best fit.” Through the development process, they developed a strong relationship that would ultimately change the face of the city.

aerial view of the Amazon campus

The Amazon headquarters is centrally located in the South Lake Union neighborhood of Seattle, WA, with easy access to I-5 and SR 99, which act as the neighborhood’s east and west boundaries.

Navigating Multi-phase Development Challenges and Financing Hurdles

Development of the Amazon headquarters complex required innovation and coordination. Initial challenges involved the up-zoning of two blocks; approvals for alley “vacations” along three blocks, the process by which an abutting property owner can petition the City to acquire the right-of-way for the adjacent alley; and incorporation and renovation of two existing historic buildings.

The complex deal required negotiation of multiple 14- to 16-year leases with rental rates and delivery dates fixed before the project was designed or entitled. Each of the six phases was financed individually, with the first two loans closing just days before the financial crisis commenced in September 2008. The next three phases were financed during the worst capital markets environment since the Great Depression. During this time, debt financing was sought for the first four buildings of the new Amazon headquarters. Conditions were such that lenders were backing away from large transactions and single tenant developments and institutions wanted to diversify risk by turning to smaller, multi-tenant projects. With high vacancies in office product throughout the country, construction loans were in disfavor. In spite of this, Vulcan was able to secure nearly $500 million of construction financing from six different lenders because of the company’s established relationships and position as the project sponsor, as well as the investment-grade credit of their tenant, Amazon.

the plaza of Phase Ia of the Amazon campus

Each public plaza in the Amazon campus features work by local artists. Here, the yellow arcs that form the artwork Covergence, by Ann Gardner, are shown in the plaza at 426 Terry Avenue North.

While the development process was surprisingly smooth, Vulcan did encounter several construction challenges that complicated the project. This included significant upgrades to existing streets and infrastructure, and the movement of many utilities to develop the buildings in a compressed timeline.

One unique challenge involved erecting a new high-rise building next to a fragile historic structure. Underpinning of the Terry Avenue Building was required to prevent it from falling into the neighboring pit, where a 12-story structure with below-grade parking (Amazon Phase 4) was being constructed.

From the beginning, both Vulcan and Amazon sought a unique urban campus feel, rather than adherence to a suburban model with a cookie-cutter building design. To create a visually pleasing and aesthetically diverse project, three different architects designed the Amazon buildings. A common set of design elements were used to activate the streetscape, but each building features an individual architectural style. Exteriors included a variety of materials such as board-formed concrete, multi-colored metal panel cladding, and art glass and curtain wall window systems. The distinctive lobbies feature salvaged artifacts, such as street signs and graffiti art from the neighborhood, and benches made from beams recycled from the buildings that were razed to make way for the new development. The interior workspaces were designed for maximum flexibility, allowing work groups to reconfigure walls and stations overnight to accommodate the evolving business needs of Amazon.

the Terry Avenue Building on the Amazon campus

The renovation of the 1925-era Terry Avenue building benefited from 3D Building Information Modeling (BIM), which helped weave together old and new structural and design elements.

Incentives and Design Features

In exchange for the rezoning, Vulcan contributed $6.4 million toward affordable housing and the city’s daycare fund. As part of the alley vacation process, Vulcan incorporated ideas from the community to create a series of vibrant public plazas across the Amazon campus. Today, these plazas contribute to a strong sense of place, giving workers, residents and visitors spaces to congregate, relax and enjoy the work of local artists. In addition, Vulcan and the city of Seattle, along with community input, developed the “Terry Avenue Guidelines” which outline development criteria along Terry Avenue, the street front that runs parallel to much of the Amazon campus. Once a seldom traveled alley-like street peppered with warehouses, Terry Avenue has become a major focus of the neighborhood. Notable features include a 31-foot-wide sidewalk, a shared street for pedestrians and cyclists, and European-style street lights and pavers, all of which enhance the pedestrian experience. Terry Avenue is replete with retail shops and restaurants and also contains the South Lake Union Streetcar line. The streetcar connects to the main public transit hub downtown, providing access to the city’s growing light rail line and extensive, regional bus service. The campus location has also allowed Amazon to attract top talent seeking to live in a vibrant, urban community.

Amazon South Lake Union Campus Project Summary

Meeting Demand While Staying True to the Neighborhood

The Amazon buildings include 100,000 square feet of retail space, approximately 95 percent of which is leased to primarily locally-owned restaurants and other businesses. As a result, the absence of numerous national chains gives South Lake Union a distinctive local character.

True to tech culture, the Amazon campus is dog-friendly inside and out, enabling employees to bring their dogs to work. The way the public plazas allow employees from all buildings to interact is truly unique — there is something cool about going outside on a rare sunny day in Seattle at lunchtime and seeing everyone walking their dogs.

In October of 2012, Vulcan announced that Amazon planned to purchase the campus for $1.16 billion. The transaction closed in December 2012, making it the largest single tenant sale of the year in the United States. Accommodating Amazon’s need for campus expansion, Vulcan will break ground on another 380,000-square-foot structure for Amazon in the first quarter of 2013.

table listing of the development team for the Amazon campus

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